backOn July 27, 2022, SEC Chair Gary Gensler delivered remarks at the Center for Audit Quality, Sarbanes-Oxley at 20: The Work Ahead. Chair Gensler highlighted the creation of the PCAOB under the Act, including the PCAOB’s power to create auditing standards. Notwithstanding that authority, Chair Gensler noted that the Board has been slow to act and has left in place most of the AICPA interim standards. He acknowledged, however, that the PCAOB announced plans in May 2022 to update all interim standards.
Observing that some audit firms had re-built their consulting practices after having spun them off when the Act first passed, Chair Gensler also called for strengthened auditor independence rules. He stated that he has asked the PCAOB to consider updating the auditor independence standards and noted that the SEC may need to take a “fresh look” at its independence rules. Chair Gensler also encouraged firms to review and enhance their independence policies.
Finally, Chair Gensler emphasized that the Act covers foreign issuers in the United States. In particular, he referenced the Holding Foreign Companies Accountable Act of 2020, which prohibits foreign issuers from trading on U.S. markets if they are not audited by accounting firms subject to PCAOB inspection, and remarked that only two jurisdictions, China and Hong Kong, have not permitted PCAOB inspections. Whether U.S. markets will include Chinese issuers will be “up to our counterparts in China,” Chair Gensler said, because the SEC is “not willing to have PCAOB inspectors sent to China and Hong Kong unless there is an agreement on a framework allowing the PCAOB to inspect and investigate audit firms completely.”
Chair Gensler’s prepared remarks are available here.